Tuesday, 26 September 2017

The Continuation of ‘Government Sachs’ – A Focus on Gary Cohn

Earlier this year here
in Financial Regulation Matters, we
took a look at the confirmation of Steven Mnuchin as Treasury Secretary in the
U.S. from within the concept of ‘Government Sachs’, which is a phrase that has
been adopted to describe the continuous presence of former and prospective
Goldman Sachs employees within the top offices of the United States political framework.
The previous post focused on Mnuchin as he ascended to one of the most crucial
jobs within the American political framework, but in this post the progression
of Gary Cohn, who sits as the Director of the National Economic Council (NEC),
will be the focus. Whilst the existence of ‘Government Sachs’ will not be
questioned because, quite frankly, it cannot be questioned, assessing the effect that Cohn is having is an
important endeavour because, as is generally accepted, these are currently quite
extraordinary times.

We saw in the last post on ‘Government Sachs’ that Goldman’s
stranglehold
on these societally-important positions is extensive and historic, with the
connection dating back to Roosevelt (and likely much farther
back). Yet, the formal
departure of another Goldman alumni – Steve Bannon – has slightly reduced
the perceived hold that the Company
has upon the Trump Administration, so the question is what effect has that move
had upon the Goldman/Trump dynamic? Well, in Gary Cohn, it is clear that the
Goldman/Trump dynamic is going from strength to strength, with Donald Trump
proudly declaring, in relation to Cohn, that he wants ‘people
that made a fortune’ in charge of policy, not ‘poor people’. Whilst it is
not even contentious anymore to state that Donald Trump has kept very few, if
any of his campaign promises, the promise to ‘drain the swamp’ is
probably the most obvious lie he presented to the American electorate. No one
epitomises that ‘swamp’ more than Gary Cohn, and his record whilst at Goldman
provides more than enough evidence to suggest that rather than him being
heralded for taking a job that pays ‘peanuts’
($180,000 a year of taxpayer money). If we consider Cohn progression and
superimpose that onto a chart of the financial crisis and its creation, the
synergy is clear to see. Starting in 1990,
Cohn would navigate Goldman so that in 2002 he was name Head of the Fixed
Income, Currency and Commodities division, which paved the way for Cohn to be
named as co-Head of the global
securities business in 2004 – as we know, just three years later Goldman
would be at the centre of the system that brought the world to its knees on the
back of its securities business; Cohn was paid more
in 2007 than the Boss of Goldman, Lloyd Blankfein.

If we look at Cohn’s relationship with Trump, we can see,
bar two media articles, that Cohn is particularly important for Trump and his
attempted policy revolutions (which are consistently being defeated). The first
article which paints a differing picture comes from the ultra-right-wing and
Steve Bannon mouthpiece Breitbart,
which suggests that his place within the Trump Administration is crumbling.
Whilst a publication like Breitbart
is particularly distasteful, it worth mentioning that its attempts to ramp up
pressure on Cohn comes from his denunciation
of Trump’s remarkable and extremely unpleasant lack of support regarding the
events in Charlottesville recently, which they are stating is the reason that
Cohn is not
being considered for the role of Chairman of the Federal Reserve. Yet, to
look at Cohn in relation to the Fed is missing the point entirely, because his
role in ‘Government Sachs’ can be achieved from his current position, one which
did not need Congressional approval. If Cohn’s tax policies are to be adopted
because, it is generally understood that Trump’s economic-related policies are
in fact Cohn’s economic-related
policies, then it is being suggested by onlookers that Goldman stands to save
more than $1 billion a year in taxes alone. Additionally, another notable
element of Trump’s apparent economic policies is to ease
the restrictions and regulations surrounding the Initial Public Offering
process which is, coincidentally, a Goldman
specialty dating back over 100 years.

Ultimately, we can be confident that whenever we hear Trump
talk about economics, what we are hearing are Cohn’s words. Trump’s aiming for
Dodd-Frank, when viewed within the Cohn-perspective, makes a lot of sense when
we consider that Goldman will immediately and greatly profit from any
deregulation. In reality, whilst Mnuchin was having his Congressional
confirmation delayed over missing assets on his disclosure, Cohn was already in
the White House and, if we remember, the crosshairs were targeted on Dodd-Frank
almost immediately after Trump took office (in a more systemic way than the
haphazard campaign promises anyway). It is being suggested by onlookers that
whilst Mnuchin sits in the Treasury Offices blocks away from the White House,
Cohn sits in the office a couple of doors away from the Oval Office, and this
makes sense. There is a reason that Cohn was paid more than Blankfein in 2007
and that is because he is a consummate professional, or a ‘company man’ if you
will, and can be trusted to enforce Goldman’s will in a manner which is
required so soon after the Crisis. The progression of Cohn from the Senate
hearings to the White House seems remarkable, but in reality it simply is not. ‘Government
Sachs’ is real and is clearly evident, but with quite some time left in Trump’s
term, the ‘end-game’ for Cohn needs to be considered. A pragmatic view would be
that he is in that position to protect
Goldman as the economic cycles career away from the Financial Crisis, but a
cynical view is that Cohn is playing his part in readying society for the next
onslaught, and the conclusion as to which one of those views is correct can be
clearly found in monitoring the tearing apart of Dodd-Frank. If Dodd-Frank is
deconstructed so soon after the Crisis, which in itself is a truly remarkable
consideration, then we should know that the system is gearing up for another
wave of extraction; in that sense, Cohn’s actions over the next few years are probably
more important than Donald Trump which, although may seem surprising
considering the day-by-day degeneration of political standards in the U.S.,
signifies the importance of financial regulation in this modern society.

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